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How To Protect Yourself From A Commercial Debt Nightmare

How To Protect Yourself From A Commercial Debt Nightmare

As we wrap up the year and get planning for 2022 it is time to reflect on the previous 12 months and improve our processes, so we are in a strong position for the year ahead.

Over the past 12 months we have noticed three key areas where businesses must be better equipped to avoid a commercial debt nightmare in 2022.

But first, let us explain why 2022 could be an extremely challenging year for credit control.

Corporate insolvencies are a ticking time bomb

Corporate insolvencies in October this year were 63% higher than the number registered in the same month in the previous year (864 in October 2020). This means the number of insolvencies were just 5% lower than pre-pandemic levels in October 2019.

It is important to note that winding up petitions could only be put forward to courts as of 1st October, after a ban was put on them throughout the pandemic. The caveat now though is that debts must be worth at least £10,000 for a winding up petition to be brought forward.

When this threshold is eventually removed, we will see the number of corporate insolvencies spike, by as much as 60%.

 This will put enormous strain on the credit cycle and will put thousands of businesses at risk of not being paid, negatively impacting cashflow.

Protecting yourself from a commercial debt nightmare

With the uncertainty of the economy and the imminent spike in insolvencies as a business owner or credit controller you must remain vigilant with thorough processes to avoid bad debt in 2022.

Here are three of the most common credit control mistakes we have witnessed over the past 12 months that must be rectified to avoid a commercial debt nightmare.

Have all paperwork and communications ready

When you need support collecting unpaid commercial invoices we will always endeavour to collect your full amount, including late payment fees, compensation and interest you are entitled to.

However, to build an effective case against your debtor we must have all paperwork such as invoices and all communications such as an email chain. Failing to have the relevant documents to support your case may mean that you are unable to get the support needed to recover your unpaid invoices.

Act with urgency

Given the uncertainty of the environment, particularly at the beginning of the year, we noticed more businesses hesitating when they have had a substantial amount of commercial debt to collect.

As we rebuild, with less government support for businesses in 2022 compared to the previous two years, it is critical that businesses act with urgency when invoices are overdue.

When you have commercial debts, you must be proactive to have the best chance of recovering what you are owed.

With the expected strain on the credit cycle that we have discussed, businesses that do not act quick enough risk missing out on what they are owed due to the monumental impact corporate insolvencies are expected to have across all industries.

Run thorough company and credit checks

One of the biggest credit management traps businesses fall into is not having a complete understanding of their customers’ credit worthiness.

We discuss this in depth in our complete guide to credit control, an effective credit check should answer the following questions:

  • Can your customer afford to pay the full invoice amount within the agreed credit terms?
  • How likely are they to run into financial difficulties?
  • Are there any notices that you should be aware of that may indicate potential problems in paying you?
  • What is their track record of paying on time?

Effective credit checking should answer all these questions for you, helping mitigate credit risk for your own business.

Check-it from Know-it allows you to credit check and monitor businesses from across the UK with real-time data from independent sources such as Graydon, Companies House, The Gazette and Unsecured Creditor Claims. Check-it brings all key credit and company information into one place, and your first credit report is free!

Collecting unpaid invoices in the new year

Getting 2022 off to the best possible start means being organised this side of Christmas.

Clearing up your sales ledger and collecting your unpaid invoices will bring a healthy boost to your cash flow so you can start the new year right.

Darcey Quigley & Co have partnered with Know-it, the revolutionary new credit management platform. Collect-it provides you with instant quotes to recover your overdue invoices in just one click, and your case will be managed by us here at Darcey Quigley & Co. Sign up and get 30 days free.

Our friendly team are always on hand to discuss any commercial debts you have as well as answer any queries on making your credit management effective. Schedule a call with our team at the time that suits you or call us on 01698 821 468.

Meet our credit management and commercial debt recovery content writer, Declan!

With a keen eye for detail and a passion for educating others, Declan is committed to creating informative and engaging content that empowers readers to get a firner grasp of their credit control to improve their cashflow.

Connect with me on LinkedIn!

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